FDIC vs sweep network coverage: which do you have?

FDIC and sweep networks aren't the same thing. FDIC is the $250K floor. A sweep network multiplies it to $10M. Most practices need both, layered.

Two phrases get used interchangeably: "FDIC-insured" and "covered by a sweep network." They're not the same thing. Most multi-location practices need both, layered.

FDIC: The floor

The FDIC is the federal agency. It insures your first $250,000 per depositor, per bank, per ownership category. That coverage is automatic at any FDIC-member bank. You don't sign up. You don't pay a fee.

The catch: $250K. That's the entire coverage. Above the line, you're exposed, and working out exactly how much (opens in a new tab) only takes a minute of arithmetic.

Sweep network: The multiplier

How a sweep network actually moves your deposits (opens in a new tab) comes down to a private system (IntraFi Cash Service, R&T's IND, CDARS) that splits your deposit into $250K slices and places each slice at a different FDIC-member bank.

The slices are still FDIC-insured. The network is just the routing layer. You see one balance at your primary bank.

Result: $10M of FDIC coverage per entity, sometimes more, stacking cleanly across an MSO-PC structure (opens in a new tab).

How they actually relate

A sweep network doesn't replace FDIC. It multiplies it.

Without a sweep:

• $400K at one bank = $250K insured, $150K exposed

With a sweep:

• $400K spread across 2 destination banks = $400K insured

The FDIC mechanic is the same in both cases. The sweep just makes sure your balance never crosses $250K at any single bank.

What you need

Almost every practice past $250K needs both:

• FDIC coverage. You already have it. It's automatic at any member bank.
• A sweep network. You may not have it. Most generalist banks don't offer one, the same feature gap that shows up in how Mercury's treasury yield compares to Lemma's per-entity sweep coverage (opens in a new tab) for a healthcare practice.

Without the sweep, you have $250K of real coverage and a false sense of safety on the rest.

How to tell what your bank gives you

Three questions for your relationship manager:

1. Is this account at an FDIC-member bank? (Yes is the only acceptable answer.)
2. What's my total insured balance, broken out by destination bank?
3. Which sweep network do you use, and can I see the network's bank list?

If your bank can't answer #2 in one email or #3 at all, you're operating on FDIC alone. Above $250K, that's a problem.

Common misreadings

Three things CFOs get wrong about FDIC, in order of frequency:

• "My bank's website says FDIC-insured, so I'm fully covered." Only up to $250K. The rest is named, but not protected.
• "I have multiple accounts at my bank, so I'm above $250K." No. FDIC limits aggregate at the bank level across an entity. Multiple accounts at one bank still cap at $250K total.
• "Sweep networks are some new fintech thing." They've been around since 2003. Major hospital systems and Fortune 500 treasuries use them.

A note on "FDIC-like" products

You'll hear pitches for products that sound similar but aren't:

• Money market funds: not FDIC-insured. Different protection (SIPC).
• T-bills: backed by the US Treasury. Safer than FDIC in some ways, but not FDIC.
• Stablecoins: not FDIC-insured no matter what the issuer claims.
• "Pass-through coverage": sometimes legit (sweep networks), sometimes marketing. Verify.

If a banker uses the phrase "FDIC-equivalent," ask exactly what that means in writing.

FDIC is the floor. A sweep network is the multiplier. Use both. Anything less than $10M of insured coverage per entity is leaving safety on the table.